How Blockchain Technology Can Solve the Challenges of Coordinating Large Groups

One of the key factors that separates humans from animals is our ability to collaborate and coordinate ourselves to achieve a common goal. Human beings are not the fastest or strongest animals – we also lack furs, claws, or teeth to survive alone in the woods. However, our intelligence has been instrumental in helping us combine resources to be on the very top of the value chain.

However, as our groups get larger, it becomes increasingly more difficult to manage cooperation between people who often end up developing conflicting interests and ideas. It is much easier to coordinate 4 people towards a common goal than it is to coordinate 4000 people towards the same goal. In fact, many social studies have highlighted the challenges of coordinate large groups as follows:

3 Challenges that organizations face as they scale up

Coordination Costs

Coordination costs, an offshoot of transaction cost economics maintain that one of the key costs that organizations incur is the need to keep all stakeholders united towards a common purpose. In effective coordination often results in missed opportunities, wasted revenue, and redundant processes. For instance, Marshall L. Fisher, professor of operations and information management at Wharton in his 2006 paper titled “What Is the Right Supply Chain for Your Product?” observes that “poor coordination among supply chain partners was wasting $30 billion annually. Supply chains in many other industries suffer from an excess of products and a shortage of others owing to an inability to predict demand.”

Motivation costs

Motivation simply refers to the will to work; however, the performance of people in an organization is often a function of their abilities and the kind of motivation they get. At the magical Dunbar’s number of 150, organizations start seeing employees having a “us” VS “them” mentality in relation to management. Employees start to lose their motivation when they stop feeling like an indispensable part of an organization.

Relational loss

Relational loss for an organization is similar to motivational costs in that individuals in larger teams tend to perform worse that individuals that work out of small teams. Unfortunately, as an organization gets bigger, it runs the risk of seeing a disconnect between its leadership/management and its employees/foot soldiers. In fact, social loafing predicts that people will start to exert less effort to reach a goal when they are part of a group then when they work alone.

Using blockchain technology to run organizations without a C-Suite

As much as it is interesting to watch the bull/bear market run of cryptocurrencies, business executives across different industries must start paying attention to the potential disruption that blockchain can bring to organograms through DAOs. A DAO is simply a decentralized autonomous organization which is capable of running effectively through the use of smart contracts encoded on blockchain technology.

DAOstack is offering businesses a blockchain-based platform to run their operations effectively without necessarily needing to have a CEO or a C-Suite. DAOstack bills itself as a toolkit for exponential organizations that want to explore the possibilities of building a thriving DAO ecosystem. DAOstack wants to set up shop as the WordPress of blockchains by giving companies the tools to create a DAO without spending much time writing code from scratch. DAOstack is positioning itself as a tool for different kinds of organizations but its biggest use cases are for large-scale organizations. Hence, enterprise clients can leverage its modular governance plug-ins to create different entities on an as-needed basis.

DAOstack is uniquely positioned to power the DAO economy with stack categorization of its process. The fact that contributors on DAOs built on DAOstack platform will be incentivized through its token economy also helps to promote the platform as a tool for decentralized collaboration.

The DAO economy has the potential to birth new organizations that will change the course of history in much the same way that internet-based organizations such as Facebook, Amazon, and Google changed the world. For one, decentralized decision-making in organizations will birth new types of structures that makes it easy for the wisdom of the crowd to shine as opposed to the current model where it is hard to judge if people have the best interest of the company at heart.